Decision Nº LRA 185 2011. Upper Tribunal (Lands Chamber), 13-05-2013
| Jurisdiction | UK Non-devolved |
| Judge | Her Honour Judge Alice Robinson |
| Date | 13 May 2013 |
| Court | Upper Tribunal (Lands Chamber) |
| Judgement Number | LRA 185 2011 |
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UPPER TRIBUNAL (LANDS CHAMBER)
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UT Neutral citation number: [2013] UKUT 0153 (LC)
UTLC Case Number: LRA/185/2011
TRIBUNALS, COURTS AND ENFORCEMENT ACT 2007
LANDLORD AND TENANT – service charges – LVT determined charges reasonable – accountancy evidence disputing charges had been incurred – s.27A Landlord and Tenant Act 1985 – LVT failed to have regard to tenant’s evidence and failed to determine if charges actually incurred before determining reasonableness
IN THE MATTER OF AN APPEAL AGAINST A DECISION OF THE
LEASEHOLD VALUATION TRIBUNAL FOR THE
LONDON RENT ASSESSMENT PANEL
BETWEEN:
(2) THOMAS CHARLES GAYDON
and
ISLAND HOMES HOUSING ASSOCIATION LIMITED Respondent
Re: 33 Midship Point & 82 Bowsprit Point
The Quarterdeck
London E14
Before: Her Honour Judge Alice Robinson
Sitting at: 43-45 Bedford Square, London WC1B 3AS
on 20 March 2013
Mr Brown appeared in person
David Wright appeared on behalf of Mr Gaydon
Mr Wakil Ahmed of One Housing Group Limited appeared on behalf of the Respondent
© CROWN COPYRIGHT 2013
The following cases are referred to in this decision:
Forcelux v Sweetman [2001] 2 EGLR 173
Yorkbrook Investments Ltd v Batten (1986) 18 HLR 25
The following further cases were referred to in argument:
Holding & Management (Solitaire) Ltd v Stephanie Sherwin [2010] UKUT 412 (LC)
Leonora Investment Company Ltd v Mott MacDonald Ltd [2008] EWCA Civ 857
Warrior Quay Management Company Ltd v Captain Z C Joachim LRX/42/2006
DECISION
Introduction
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These are appeals by Patrick William Brown and Thomas Charles Gaydon against decisions of the Leasehold Valuation Tribunal (“the LVT”) dated 26 September 2011 relating to 33 Midship Point, The Quarterdeck, London E14 8SW and 82 Bowsprit Point, The Quarterdeck, London E14 8NU. Mr Brown is the lessee of 33 Midship Point and Mr Gaydon is the lessee of 82 Bowsprit Point. The respondent (“the Landlord”) is the freehold owner of the Barkantine Estate on the Isle of Dogs comprising a number of blocks of flats. These include The Quarterdeck which comprises four tower blocks each containing 82 flats, one of which is Midship Point and another of which is Bowsprit Point. Some of the flats in the blocks are held on long leases and others are let by the Landlord as a Housing Association and Registered Social Landlord to assured tenants.
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In its decisions the LVT considered claims by the Landlord to recover arrears of service charges which had been transferred from the county court. Both claims related to the period from 5 December 2005 to 1 July 2010. The LVT considered a number of issues and concluded that all of the charges demanded in respect of 33 Midship Point were reasonably incurred with the exception of the charge for electricity in 2007/2008 which was reduced from £243.70 to £68.74 and the management charge in 2008/2009 which was reduced by £2.58. In respect of 82 Bowsprit Point the LVT determined that Mr Gaydon was liable to pay the sums claimed with the exception of the charges for management which were limited to £150 each year and the charge for electricity which was limited to £117 each year. In respect of both properties the LVT held that no balancing charges are payable in any of the relevant years until service charge certificates which comply with the requirements of the lease have been given to the tenant.
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On 1 March 2012 the Upper Tribunal (Lands Chamber) granted permission to appeal limited to a single ground namely that the LVT failed to have regard to the evidence of Mr Kong Lee who gave evidence on behalf of Mr Brown and whose evidence the LVT was asked to take into account when dealing with the case of Mr Gaydon. The appeal was ordered to be dealt with by way of review.
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The LVT hearing was due to start on 11 July 2011 and on 23 June 2011 the parties exchanged witness statements including Mr Lee’s statement. In it he took issue with a great many figures in documents provided by the Landlord which were before the LVT relating to a number of different service charge topics. His primary point, although not the only one, was that there was a discrepancy between figures in the service charge account for the year 2009/2010 and what he described as the Landlord’s ledgers. The ledgers are schedules of expenditure on different items relating to the particular block of flats which I was told are intended to be a complete record of actual expenditure on an individual block pulled together for service charge purposes.
Law
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Section 18(2) of the Landlord and Tenant Act 1985 (“the 1985 Act”) provides:
“The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.”
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Section 19(1) of the 1985 Act provides:
“Relevant costs shall be taken into account in determining the amount of a service charge payable for a period—
(a) only to the extent that they are reasonably incurred, and
(b) where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard;
and the amount payable shall be limited accordingly.”
5. In Forcelux v Sweetman [2001] 2 EGLR 173 the Tribunal (Mr P R Francis FRICS) held that in determining whether costs are reasonably incurred for the purpose of s.19(1)(a) two questions must be asked. First, whether the action taken in incurring the costs was reasonable. Second, whether the amount of those costs was reasonable.
6. Section 27A(1) of the 1985 Act provides:
“An application may be made to a leasehold valuation tribunal for a determination whether a service charge is payable and, if it is, as to—
(a) the person by whom it is payable,
(b) the person to whom it is payable,
(c) the amount which is payable,
(d) the date at or by which it is payable, and
(e) the manner in which it is payable.”
7. On an application under s.27A it is for the tenant to establish a prima facie case that the service charge expenditure has not been reasonably incurred after which it will be for the landlord to meet those allegations, see Yorkbrook Investments Ltd v Batten (1986) 18 HLR 25 at p.35.
8. The LVT correctly identified the issue it had to determine in paragraph 6 of both decisions:
“The tenant does not dispute that he failed to pay the service charges claimed but asked the Tribunal to determine whether he was liable to pay them. The Tribunal’s jurisdiction to determine liability to pay service charges is derived from section 27A of the Landlord and Tenant Act 1985.”
Decision
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The appellants main complaint was the inadequacy of the material produced by the Landlord to substantiate the money claimed in the service charge bills. They drew attention to an Audit Commission report at the end of 2008 that was severely critical of the Landlord’s management of annual service charges and refers to poor accounting and failure to calculate actual expenditure. They said that until the 2009/2010 service charge year no supporting material had been provided. Mr Lee is another lessee and an accountant and he had looked at the documents that had been made available for inspection for that year and had found numerous omissions and discrepancies. They argued there was no evidence to support the service charges claimed and it was not possible to reconcile the material provided by the Landlord with the service charge accounts.
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It was submitted on behalf of the Landlord that the LVT had considered all the appellants points including those raised by Mr Lee and found that the service charges were reasonable. The appellants were using emotive language, they did not want to pay service charges and were looking for any excuse to challenge every aspect of the LVT decision. They would not be happy with any decision of the LVT or Lands Chamber.
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At the hearing I drew attention to the fact that the appeal was to be dealt with by way of review and was limited to consideration of whether the LVT had regard to Mr Lee’s evidence. Therefore it is only possible for this tribunal to consider the appellants’ general complaints in that context. I also noted that by virtue of paragraph 7 of the Fifth Schedule to the lease the lessee has a right to inspect the receipts and vouchers relating to service charge expenditure, a right which could be enforced if necessary. The appellant’s motives are irrelevant. They have a right of inspection in accordance with the lease and, in accordance with the 1985 Act, they are entitled to ask the LVT to consider whether a charge has actually been incurred and, if it has, whether it is a reasonable charge.
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As already indicated, Mr Lee’s evidence dealt with the service charge year...
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